The First Hall of the Civil Court, presided over by Mr Justice Joseph Zammit McKeon, on November 1, 2012, in the case “Ronnie Grima and his wife Diane Grima vs Registrar of Companies” held, among other things, that the cancellation of a company under article 325(2) of the Companies Act did not prejudice persons indicated in sub-article (4) of article 325 from requesting its reinstatement.

The facts in this case were as follows.

The court said that it tried to strike a balance between the interests of Ronnie Grima and the registrar of companies, in particular when there was no guarantee that the company would comply with its obligations under the Companies Act

Ronnie and his wife Diane Grima had taken legal proceedings against Enemalta, White Brothers Ltd and the company Polidano Service Station and Plant Hire Ltd whereby they requested payment of damages suffered as a consequence of an incident on July 24, 2004, at his place of work, during working hours and while carrying out his duties. As a result, Grima had to retire from work, owing to his permanent disabilities.

The First Hall of the Civil Court’s decision of July 13, 2009 decided in his favour, condemning defendant companies to pay him €124,528 with interests. As this decision was subject to appeal, Grima had an interest that defendant company remained in existence.

Grima later discovered that the company Polidano Service Station and Plant Hire Ltd was struck off the company register, in terms of article 325 of the Companies Act, with effect from January 31, 2012.

Aggrieved by the fact that the company Polidano and Plant Hire Ltd was cancelled from the Register of Companies, Grima and his wife proceeded to file these legal proceedings against the Registrar of Companies.

They requested the court:

1. To order the Registrar of Companies in terms of article 325(4) of the Companies Act, to restore the company Polidano Service Station and Plant Hire Ltd on the Register of Companies and for it to be deemed to be still in existence;

2. To make all necessary publications in terms of law in connection with the re-instatement of the company and this according to directions which the court felt to be appropriate.

In reply, the Registrar of Companies submitted that the company Polidano Service Station and Plant Hire was registered on April, 15, 1991. He said that the company failed for several years to perform its obligations and statutory duties under the Companies Act.

The fact that this company did not comply with its legal obligations for several years was good enough reason for the Registrar of Companies to assume that the company was ‘dormant’ and not carrying out its business in terms of article 325 of the Companies Act.

In addition, after notices were published according to article 325 of the Companies Act, no person came forward, showing any interest to stop the cancellation of the company from the Register of Companies.

The Registrar of Companies proceeded to publish the notice to cancel the company with effect from January 31, 2012. Grima had not informed the Registrar of his interest before the company was cancelled.

The Registrar added that if this court felt it appropriate to reinstate the company on the register and since Grima acted within five years from the publication of notice of cancellation, he would not object that the company be restored to the register.

It was stated, however, that this court should impose time limits from the date of the Court of Appeal decision for Grima to enforce his executive title against the company, in order not to leave on the company register a company which failed to comply with the law for too long.

The court considered article 325 of the Companies Act. The Registrar took action to strike off the company on the basis of article 325(1) and (2

“(1) Where the Registrar has reasonable cause to believe that a company is not carrying on business or is not in operation, he may send to the company by post a letter inquiring whether the company is carrying on business or is in operation.

(2) If the Registrar receives an answer to the effect that the company is not carrying on business or is not in operation, or does not within one month of sending the letter receive an answer thereto, he may send to the company by post and publish a notice in the gazette or on a website maintained by the Registrar and in a daily newspaper circulating wholly or mainly in Malta that, at the expiration of three months from the date of the last publication of the said notice, the company’s name shall, unless cause is previously shown to the contrary or the registrar is satisfied that there are sufficient grounds not to proceed with the striking off, be struck off the register; and the assets of the company shall devolve upon the Government of Malta.”

Grima requested the court to reinstate the company on the register under sub-article 4 of article 325.

(4) If any member or creditor of the company, or any other person who appears to the court to have an interest feels aggrieved by the fact that the name of the company has been struck off the register by virtue of this article, the court on an application made by the member or creditor or such other person before the expiration of five years from the publication of the notice of the striking off provided for in subarticles (2) and (3) may, if satisfied that it is proper that the name of the company be restored to the register, order that such name be restored to the register, and upon an official copy of the order being delivered by the registrar of the courts to the registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off; and the court may by its order give such directions and make such provisions as seem fit for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off. The Registrar shall forthwith proceed to publish a notice in the gazette or on a website maintained by the Registrar and in a daily newspaper circulating wholly or mainly in Malta that the name of the company has been restored to the register…”.

The court was of the opinion that the registrar of companies had sufficient reasons to commence the procedure to cancel the company under article 325(1) of the Companies Act.

It appeared that the registrar observed the procedure under article 325(2) and as the company still appeared dormant, he proceeded to cancel the company off the register.

Under article 325(2), the company, through its legal representative, had a period of three months to satisfy the registrar not to proceed with the cancellation of the company. If no action was taken, or if the Registrar was not satisfied within this term of three months, the company could be struck off.

However, the cancellation of the company under article 325(2) did not prejudice persons indicated in sub-article (4) of article 325. A member or creditor of a company or some other interested person did not have to meet the deadline under article 325(2). Unless such persons failed to satisfy the requisites under article 325(4), the court could still accept their request to reinstate a company, even if they did not comply with article 325(2).

Sub-article (2) and sub-article (4) of article 325 were clearly distinct, noted the court.

These sub-articles provided remedies which were available to persons with different interests, pointed out the court.

The court also said that Grima was entitled to request the remedy under sub-article (4) of article 325 as he and his wife, as creditors, had an interest.

Our legislator did not qualify the meaning of ‘creditor’ under sub-article (4). The term ‘creditor’ was to be construed widely, to include any type of creditor and person interested, and was not limited to persons with executive titles. Though our law did not refer to ‘prejudice’, it was evident that this should be considered by this court, to determine whether an applicant had sufficient reasons to request this remedy.

The court noted that Grima and his wife were entitled to file this lawsuit even if the court decision dated July 13, 2009, was subject to appeal. They took action within five years from the publication of the notice of cancellation.

The court said there were good reasons for the company Polidano Service Station and Plant Hire Ltd to be reinstated in the company register. It was not just because the Registrar didnot oppose.

The court considered that if the company remained struck off, Grima would be prejudiced, and this court should not allow such prejudice.

The court took into account the functions of the Registrar of Companies. It ordered that Polidano Service Station and Plant Hire Ltd be reinstated for a maximum period of two years and six months from the date the decision in the case “Ronnie and Diane spouses Grima vs chairman Enemalta Corporation”, became res judicata.

The court said that it tried to strike a balance between the interests of Grima and the registrar of companies, in particular when there was no guarantee that the company would comply with its obligations under the Companies Act.

For these reasons, on November 1, 2012, the First Hall of the Civil Court gave judgment:

1. It declared that the company Polidano Service Station and Plant Hire Ltd to be reinstated on the register.

2. It ordered the reinstatement for a maximum period of two years and six months from the date when the decision in the case “Ronnie and Diane Grima vs Enemalta” became res judicata.

3. Within 15 days, a copy of the court order had to be delivered to the Registrar of Companies for registration. The Registrar of Companies was ordered within 15 days from when the court registrar delivered an official copy of this order, to register Polidano Service Station and Plant Hire Ltd in the Register of Companies.

From the date of its registration, the company would be deemed to have continued its existence, as though it had not been cancelled.

The Registrar of Companies was, in addition, ordered within 15 days from the date of registration of Polidano Service Station and Plant Hire Ltd in the Register of Companies, to publish the notice on its website and gazette, whereby it was stated that this company was reinstated in the Register of Companies.

Dr Grech Orr is a partner at Ganado & Associates.